Cargill profit falls 20 percent in a swirl of changing food, trade and energy trends

Cargill Inc. saw its net earnings drop 20 percent in its latest quarter on trade uncertainty, stock market volatility, lower hog volumes in China and challenges in the U.S. dairy and poultry industries.

The global agriculture behemoth, based in Minnetonka, also took a hit from near-record low ethanol prices and a reduction in export demand of the energy source, which the company makes at its corn processing plants across the Midwest.

Three of the company's four major business segments posted declines Thursday morning for its second quarter ended Nov. 30. Cargill was up against a strong comparative period from last year, which was the company's second best performance in its history for the September-November quarter.

"We strive for broad-based performance at Cargill, and that just didn't happen this quarter. It was a mixed bag," Lisa Clemens, Cargill's senior director of investor relations, said. "The environment is choppy, it's challenging. You are seeing large day-to-day market swings."

Cargill reported a net profit of $741 million, down from $924 million a year ago. Adjusted operating earnings, which the company believes shows more about the health of its operations, were down 10 percent to $853 million from $948 million last year.

Revenue was $28 billion, down 4 percent.

The privately held company, the nation's largest, is one of the few that provides quarterly financial updates publicly, though with less information than is required of firms listed on stock markets.

Animal nutrition and protein — which includes the processing and sale of meat, eggs and livestock feed — remained the company's largest segment in terms of operating earnings but was down slightly from a year ago. Demand for beef among U.S. consumers continues to grow while ranchers are providing a strong supply of cattle, a boon for Cargill's North American meat business.

But while Americans' appetite for all forms of protein buoyed Cargill's results, a challenged U.S. dairy industry as well as political instability in Central America dampened the segment.

Despite uncertainty surrounding global trade, Cargill's hallmark grain-trading business was its only segment with earnings growth in the quarter. As consumers eat more meat, Cargill sells more soybean meal to feed livestock raised for slaughter.

"One of the things we feel good about [in the quarter] is that, in this time of high uncertainty, we kept food moving to where it needed to go," Clemens said.

Cargill's industrial and financial services segment is an amalgamation of disparate business, from its metals trading to ocean shipping. Weak financial markets were a drag on the company's investments in managed funds. The global shipping industry saw sharp declines over trade fears and the potential effect policies would have on the movement of commodities.

"Our teams executed in a world of uncertainty," Dave MacLennan, Cargill's chief executive, said in a statement. "We are pushing to ready our businesses for the future with continuous improvement, financial discipline and a disruptive mind-set."

Kristen Leigh Painter • 612-673-4767